Beef commodity pricing: How to protect profits and maintain quality

Lee Plotkin

Tue, 2012-11-27 13:57

Most likely you are aware that there has been a fairly large reduction in the cattle supply. Comparing September 2012 month to a year earlier, we’re probably looking at about a 12 percent overall decrease. The largest factor in the decrease is simply where we currently stand in the cattle cycle. It’s also been greatly exasperated by the drought that hit in the North and South earlier this year.

To put this into numbers, 12 percent roughly equals about 1.5 to 1.6 million heads of cattle down, which is now translating into the higher prices we’re experiencing. Some meat experts that I’ve spoken to recently are predicting that any major relief probably won’t arrive until close to the first quarter.

Before you start taking all of the beef cuts off your menu, consider that one factor that could greatly alter this equation: demand. Demand is king. As with wholesalers, if beef prices at the supermarkets continue to remain high, demand may drop significantly (along with prices) as consumers move to other more cost-effective proteins.

So…what do we have to look forward to? Cattle weights appear to be increasing, especially with the additives mixed in with the feed. Larger cuts will be available. However, the packers aren’t contracting.

There are ways to offset higher costs without affecting quality:

• Stay in close contact with the key players at your meat purveyor. When they see the market taking a slight dip, encourage them to buy in on your behalf. Spot buys can help carry you through the holiday season.

• Offer counter-seasonal menu items. Beef products are trending in price the same way they do every year, so tenders and rib-eyes will be high for the holiday season. Porterhouse and strops will go down in price. Offer specials. Reverse those trends.

• Work with your supplier to find underutilized cuts, like flat iron steaks, game meat or by-products from a larger customer.

Lee Plotkin brings over 26 years of purchasing expertise and 6 years of operations experience to the table for growing restaurant companies. Lee has achieved great success in streamlining purchasing operations, setting up win-win scenarios and taking cost out of the supply equation for emerging brands. His company, L. P. Enterprises, works with small to medium size restaurant operations to create or improve upon their purchasing programs, which results in substantial savings and helps set the foundation for successful growth. Among his clients are Del Frisco’s Restaurant Group, Pollo Campero and Truluck’s Restaurant.